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UK: The enhancement of Hanson. (3 of 8)

UK: The enhancement of Hanson. (3 of 8) - A year after munching through Ever Ready, Hanson was at it again. In February 1983 it scuttled a near-agreed deal between Gerald Ronson's Bassishaw and retail group UDS. Bassishaw's £217 million cash bid was quic

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Published: 01 Aug 1991

Last Updated: 31 Aug 2010

A year after munching through Ever Ready, Hanson was at it again. In February 1983 it scuttled a near-agreed deal between Gerald Ronson's Bassishaw and retail group UDS. Bassishaw's £217 million cash bid was quickly outdone by a Hanson bid worth £255 million. The choice caused a split in the board but in the end shareholders delivered the prize to Hanson and Ronson took a £12 million profit and left.

The break-up from there was classic. John Collier, Richard Shops and Orbit HiFi were all sold, reaping £152 million within six months. Allders, the UK's biggest duty-free shops and department store chain, was retained and within three years was making more money than the whole of the pre-dismembered UDS. In 1989 Allders chief executive Harvey Lipsith led a £224 million MBO. "It is very difficult for retailing businesses to consistently achieve Hanson targets," he says now. The result for Hanson - an intake of near £380 million plus six years' worth of profits, all for a partly paper deal costing in the end £260 million.

The fire sale was barely over when, in October 1983, the City learned that the newly ennobled Lord Hanson (he was given a life peerage by Prime Minister Margaret Thatcher in June of that year) had picked up 9% of London Brick "as an investment". The full bid came in December. A battle with London Brick's soaring share price ensued, forcing Hanson to raise its bid from £170 million to nearly £250 million. Analysts tut-tutted.

Initially the concern over the price paid seemed justified. James Bristow, former head of London Brick, was soon at pains to point out a fall in market share, a rise in prices and a drop in quality. But Hanson's Martin Taylor maintains that large-scale modernisation since then has consolidated London Brick's position as Britain's biggest brickmaker - and a low-cost one at that.

In 1984 the pendulum swung back "over there". For years Gordon White's "ferrets" had kept tabs on US Industries, a mini-conglomerate with £1 billion in sales and sagging profits. In the spring of '84, when a group of managers decided to buy it out, White cobbled together a counter-offer over two days. Within weeks the $530 million recommended bid was won, making Hanson Industries the 100th largest company in the US. Golden parachutes for the top US executives, including $5 million to the chairman, inflamed criticism. Such cherries created a conflict of interest, it was rightly said.

In the next year, with a failed bid for Powell Duffryn still niggling at him, Lord Hanson appeared to take to navel gazing, setting off fears that the great man had lost his touch. A June 1985 cash call for £520 million put a fire under the price of several tipped UK targets - but when the next bid came it was in the US. This bid was the biggest, and the ugliest, so far.

SCM Corporation, a New York conglomerate with names like Smith Corona and paints company Glidden, had just restructured after some pedestrian times, and was looking to a brighter future. From the start, as news of the $745 million Hanson bid sank in at SCM's plush headquarters, Paul Elicker, the group's pugnacious boss, refused to speak to Sir Gordon White. SCM's views towards the British predators - eloquently described by one of their camp as "bad people" - came out instead in a wave of highly publicised court cases. Sir Gordon admitted later: "I wouldn't have gone ahead if I had known we would have got involved in the type of ethics we saw displayed."

At one stage Lord Hanson found himself in a Manhattan dock under a television-style attack by the SCM lawyer for allegedly receiving kickbacks from Hanson advisers. While this stab hit nothing but air, the main battle continued over allegations from Hanson that a joint SCM management and Merrill Lynch buyout of SCM had been skewed so as to undervalue the company and to lock out any other bidders by means of a "poison pill". Hanson initially lost its case, but won on appeal.

SCM was duly towed in for inspection at a cost of $930 million and stripped of its lavish offices, central staff and company jet. Over the next two years Durkee Famous Foods, paper and chemical interests and the big R and D spend, Glidden, were sold, the last to an acquaintance soon to be re-met: ICI. This brought in $1,006 million, a nice wad over the total paid, and left Hanson with Smith Corona (floated for $340 million) and the titanium dioxide business.